Have We Learned Anything From This Health Crisis?

debt in our society

Since the times of Adam and Eve, it has been important for mankind to learn from its collective experiences. Observing and adapting to our surroundings is fundamental to both survival as well as improving our circumstances in life. Regular readers of this blog know that a frequent topic (January 29, 2020; Dec. 4, 2019; June 17, 2019 et al) that is discussed is the proliferation of debt in our society. This build-up of borrowed money has taken place at the individual, household, corporate, state, and federal level. The enormous increase in unemployment caused by the coronavirus pandemic has increased the need for borrowing as we all attempt to survive through a period of limited cash inflows. Effective contingency planning will always suggest that consumers maintain a reserve of borrowing capacity so that it is available to them specifically for times such as these. Clearly, those who have prepared are under less financial stress than those who have not.

So, are we learning anything about austerity and preparation during these challenging times? A recent survey by WalletHub suggests that many have not changed their ways. WalletHub surveyed 450 Americans and found that 23% are spending more money because of social distancing. Forty-three percent admitted that they have indulged in some form of “comfort buying”. In some cases, the amounts are relatively small being $150 or less. However, 15% have spent more than $300 and the composition of the non-essential spending is discouraging as well. Nearly 30% went for entertainment and 23% went for the purchase of alcohol. With recreational drugs still illegal at the federal level, this category was not a potential answer, but undoubtedly, it was an item of non-essential consumption as well.

Brian Hamilton, a vice president at Smart Dollar observed “Too many people are already living paycheck to paycheck” and “American workers are up to their eyeballs in consumer debt”. He adds, “when we get through this pandemic, ‘everything must change’”. All we can say is “Brian, don’t get your hopes up”!